Extended Warrantees and Buyer Protection Plans

Is buying extended warranties a good idea? Sometimes they are called buyer protection plans too. The general consensus from almost all financial planners, writers and personal finance personalities like Dave Ramsey and Susan Orman is that they are a rip-off.

Most products come with some sort of warranty, and that is a good thing to compare when considering a purchase. However, automotive dealers and electronics sellers are always trying to get us to buy contracts that extend the normal warranty beyond the store’s or manufacturer’s.  Recently I bought a memory stick for less than $5, and I was offered a warranty by the cashier–come on, that is silly! The cost of the contract, or premium for the insurance, is usually expensive, and the odds are that most people never benefit from the investment.

They do provide some peace of mind, knowing that you won’t have to spend money in the future if the item breaks within a reasonable time period. I think there are several ways to make sure product failure doesn’t set you back financially:

  • Compare customer product reviews and ratings online before purchasing.
  • Research products in Consumer Reports. This costs a little money, but our library provides it online for free.
  • Probably the best thing people can do is to make sure they have plenty of money in their emergency savings in case a product needs repair or replacement.
  • We often buy the extended warranty ONLY for laptop computers and cell phones, especially for the one’s our children own. Laptops, tablets, cell phones and really nice iPods can be prone to break in the early years, so sometimes it is worth it to buy warranty extensions for these things.
  • Purchase things from a good retailer that you trust. Often sellers will go to bat for you to fight or recover from the manufacturer, especially if they see a lot of similar problems. Sometimes local retailers will eat the cost of the replacement or repair if they want to keep you as a customer, especially if the product failure wasn’t reasonable at all.
  • Purchase items with a credit card that automatically offers extended warranties- Is this a good idea?  This definitely goes against Dave Ramsey’s advice to always use cash and avoid using credit cards since that often causes us to overspend and build up a balance- so I don’t recommend this either. However a small percentage of credit card users are excellent at staying under budget, pay off the balance every month, and are good at non-cash negotiation, then using a credit card to provide extended warranties at no cost may be a good idea for these few people.  This is not a good option for most especially if you are trying to pay off your credit cards, and trying to break the credit card habit. If own something that you purchased with a credit card in the past, and it breaks be sure to contact your credit card company to see if there is protection.
  • Pray for your possessions. Recorded in Deuteronomy 8:4 “For all these forty years your clothes didn’t wear out…” Even though the Israelites were walking across the desert for 40 years, God maintained their clothing. That is why we pray for our cars, home and appliances to not break or wear out. We have a sedan with over 290,000 and a van with over 170,000 miles, with less than normal repairs. We had a set of tires with decent tread go over 100,000 miles, and hot water heaters last several years beyond our neighbhor’s whose houses were built before ours. We prayed for them and continue to do so, and are thankful for the blessing.
  • Maintain your possessions. It is excellent stewardship to not misuse possessions, as well as do regular maintenance. Simple things like car fluid changes, furnace and air conditioning (HVAC) regular service and filter replacements can extend the life of many things you own. Check your appliance’s, car’s, HVAC’s and other owners manuals for recommended maintenance schedules.

Conclusion: Extended warranties are usually expensive and seldom used, so for the most part avoid them.  If your car dealer offers you one, be sure to read the contract cover to cover a couple of times, to ensure that what you are considering buying covers those really expensive repairs that could really set you back. However, at the end of the day, praying for your possessions is one of the best things you can do.

2 thoughts on “Extended Warrantees and Buyer Protection Plans

  1. sher sagar

    I am writing with a grateful heart for the wisdom I have received by taking the financial courses listed. In the above article, in some cases, while this may be true, in the area of furniture purchase, in my professional opinion, this is not the case. I am an Interior Designer, and am in sales at a large furniture store, and I dealt with this subject just today. I had a gentleman buying an expensive couch, and he told me he wanted to turn the “protection plan” down, for many of the reasons listed above. He had heard it was a rip off and did not see the value in it. I had to educate him and tell him the truth, that he would be making a great mistake. When purchasing furniture, while yes there is a “limited lifetime” warranty on say the frame, (which is only seven years in some states) there is no one who will help you if you make a spill, a child takes scissors or markers to it, an item that is drug across dining table leaving a gouge, or even a poke in your brand new leather. Some companies go above and beyond, not only repairing the piece for accidents such as these, but will even replace the value at 100and allow the consumer to make another purchase. This is an incredible value, when considering you have spent hard earned money, only to have made a slip with a cup of coffee to see your new sofa ruined. Having been in the industry for 18 years, I have had the opportunity to see such expensive items look like they are ten years old, because of spills, rips and day to day use. When purchasing furniture, I would say any item over $500 is worth protecting…… Especially if the company offers to replace it! I hope this helps to clear up one area, where in my opinion, no amount of prayer, begging or pleading with the store will replace your new furniture,……..unless you were wise to get the protection plan.

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